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The Highest-Growth Machinery Stocks

Yesterday's proven track records may reveal tomorrow's winners.

Why are investors willing to pay only 10 times earnings for some stocks, but 20, 50, even 100 times earnings for others?

The short answer: growth. Companies that can grow their earnings meaningfully could make lofty current P/E ratios look cheap in hindsight.

Of course, any company can promise a rosy, growth-rich future. Figuring out which companies can actually deliver is far trickier. In this series, I take the first step by identifying companies that have put up the best growth track records in their respective sectors.

Below, I've listed the top sales growers in machinery over the last five years. Here's how to interpret each data column.

Five-year sales growth: I rank each company's sales growth, to capture its pure trailing expansion without regard to the vagaries of earnings.

Five-year analyst estimates: This column shows us how much EPS growth analysts expect over the next five years. Just keep in mind that analysts tend to grossly overestimate a company's prospects.

Five-year ROIC range:Return on invested capital basically shows you how efficiently a company is converting its debt and equity into profits. We want companies that can do a lot with a little. By looking at the five-year range, we can start to gauge both the power and the consistency of a company's profit engine.

Company

5-Year Sales Growth

5-Year EPS Growth

5-Year Analyst Estimates

5-Year ROIC Range

Force Protection(Nasdaq: FRPT)

39.6%

NM

10%

0.7% / 14.1%

Westport Innovations(Nasdaq: WPRT)

29.9%

NM

N/A

(35.7%) / (10.3%)

China Fire & Security Group(Nasdaq: CFSG)

25.6%

N/A

(6.0%)

7.4% / 25.6%

Stanley Black & Decker(NYSE: SWK)

21.7%

3.7%

14.7%

6% / 10.8%

China Yuchai(NYSE: CYD)

20.9%

NM

12.0%

3.9% / 15.0%

Oshkosh(NYSE: OSK)

17.7%

7.5%

7.4%

4.0% / 31.5%

Middleby(Nasdaq: MIDD)

16.7%

14.3%

18.3%

11.5% / 25.8%

Source: S&P Capital IQ. NM = not meaningful; EPS growth that is NM results from losses during the period. N/A = not applicable; analyst estimates that are N/A result from lack of analyst coverage.

Use the table above as a first step to help you generate ideas for your own further research. Once you identify stocks worth a closer look, the following three steps will help you further assess their growth prospects: